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Can you get the IRS to defer to its collection efforts against you if there's an emergency?

Posted by Brandon Keim | Oct 08, 2021 | 0 Comments

Collection notices from the IRS rarely strike joy into the hearts of man. However, when you're going through a personal or financial emergency, even the idea of sending overdue money to the IRS can feel impossible. Since you also don't want to get in trouble with the IRS, thereby adding more stress to your current situation, is it possible to get the IRS to relax deadlines or defer collections?

As it turns out, there may be a little leeway for relief in troubling times.

Accounts Not Currently Collectible:

Deferred Debt Payment to the IRS

The IRS has a way for people undergoing hardship to request a delay of collection. If the IRS learns that you cannot make payments against your debt, they may declare your account 'currently not collectible.' This will not erase the debt—in fact, you'll likely accrue more interest with the delayed payments. This merely means that the IRS has determined that collection efforts will likely go in vain.

To request a delay from the IRS, you'll need to fill out a Collection Information Statement, which will include information about your income and monthly expenses. After a short time, the IRS will "again review your ability to pay," which could result in renewed collection efforts.

The IRS also clarifies that they will make an effort to consider 'any sound reason' for this type of allowance. Their list of reasonable causes includes:

  • Fire or another natural disaster
  • An inability to get required records
  • Death or serious illness
  • Unavoidable absence of the taxpayer

The IRS does note that a lack of funds by itself does not constitute reasonable cause.

Managing the paperwork for collection deferral, establishing reasonable cause, making sure the IRS doesn't hit you with unfair penalties, and creating fair expectations for on-time payment: These are all difficult negotiations that you need to make sure your future isn't more difficult than it needs to be. Working with a seasoned tax attorney is the best way to navigate these types of situations.

Managing Finances During Tricky Times

If you need assistance figuring out your best strategy for fiscal responsibility during an emergency, it's best to have an experienced tax attorney on your side. We're here to help you manage your relationship with the IRS to ensure that you don't face penalties for deferred payments. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options. 

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.

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